DOL’s New Fiduciary Rule Reiterates the Importance of Working with a Fiduciary Advisor

April 30, 2024 By: Jackie Goldstick, CFP®

If you follow the financial news, the term fiduciary has come up repeatedly over the last several weeks, primarily due to the Department of Labor announcing a rule mandating that financial advisors put client’s best interests first when making recommendations for retirement plan rollovers to IRAs and annuities. There are many who oppose this rule; primarily advisors who do not have a fiduciary obligation to their clients. These may include salespeople, or people whose compensation is based on the products they sell to their clients.

The purpose of this blog post is not to debate the merits of the new DOL rule, but rather to provide a reminder of the level of care that different types of advisors have towards their clients.

Advisors who adhere to a fiduciary standard are obligated to ALWAYS act in the client’s best interest. Recommendations are only offered once due diligence and a thorough analysis of a client’s unique personal situation is completed. Conflicts of interest are disclosed upfront, and recommendations are implemented as efficiently and cost-effectively as possible.

This differs from those that adhere to a suitability standard which requires that advice be suitable or reasonable. The recommendations do not necessarily need to be in line with the client’s goals or risk profile and there is no requirement for transparency or conflicts of interest to be disclosed. The suitability standard allows “advisors” to recommend products that earn them higher commissions, even if there’s a better option available.

For clients, it is not always obvious what standard of care an advisor is required to provide. While investment professionals can go by a variety of titles – financial consultant, financial planner, wealth manager, financial advisor – the title does not provide much clarity on the level of care offered to clients. So, how can one determine if their advisor is a fiduciary?

Ask the Advisor – Advisors that operate under a fiduciary standard are proud to do so. They will most likely offer this information upfront and make this distinction early on in conversations.
Advisor Registration – Advisors that are registered with the SEC or with their state regulators as RIAs (Registered Investment Advisors) are held to a fiduciary standard. These advisors and their firms are regulated by the Investment Advisors Act of 1940. This is in contrast to agents, stockbrokers and registered representatives that are regulated under the Securities Exchange Act of 1934 and are held to a suitability standard.
CERTIFIED FINANCIAL PLANNER™ professional – If an advisor holds a CFP® designation, he or she is required to abide by a fiduciary standard by the CFP® Board of Standards.
Pay Structure – Fiduciaries typically operate under a fee-only, or possibly fee-based, compensation structure. Advisors are paid by the client in the form of fees, as compared to being paid commissions, which could influence product recommendations.

The interests of advisors who adhere to a fiduciary standard, like the advisors at Core Wealth Management, are aligned with those of their clients. Acting with integrity, guiding clients towards the achievement of their goals in a cost-effective and efficient manner and serving as a trusted partner are the pillars upon which we operate our firm. When looking for an advisor, choose a fiduciary. You can then have peace of mind that the advice offered is truly what is optimal for you and your family and is in your very best interests.

Core Wealth Management is a fee-only wealth management firm located in Jupiter, FL. Our CFP® professionals provide investment management, financial planning and advisory services, while always strictly abiding by the highest fiduciary standards. For more information, contact us today at 561-491-0231.

Jackie Goldstick, CFP® is the Principal and Director of Financial Planning at Core Wealth Management. She is a member of the National Association of Personal Financial Advisors (NAPFA) as well as the Financial Planning Association (FPA).

The material provided is for informational purposes only and should not be construed as financial, legal, or tax advice. All investments carry risks, including the loss of principal, and we encourage you to consult a qualified professional for personalized guidance. Click here to view our entire blog disclosure.

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